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Related to Deduction: tax deduction


An expense that is allowable as a reduction of gross taxable income by the IRS e.g., charity donations.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.


An amount of money that one may subtract from one's gross annual income when calculating one's income tax liability. A common misconception about tax deductions is that they represent a dollar-for-dollar reduction of one's tax liability. Rather, a deduction removes a certain dollar amount from the income the IRS uses to calculate the percentage of one's income that is owed in taxes. Common deductions are charitable contributions, business expenses, and interest on mortgages. See also: Tax credit.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


An expenditure that may legally be used to reduce an individual's income-tax liability. Potential deductions of particular interest to investors are expenditures for subscriptions to financial publications, a lock box for storing securities, and computer software for investment-related activities. These deductions, combined with employee business expenses and miscellaneous deductions, may be subtracted from a person's taxable income only to the extent their total exceeds 2% of that person's adjusted gross income. Interest paid on loans used to finance investments is deductible only against investment income. Also called itemized deduction, tax deduction. See also charitable contribution deduction.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.


A deduction is an amount you can subtract from your gross income or adjusted gross income to lower your taxable income when you file your income tax return.

Certain deductions, such as money contributed to a traditional IRA or interest payments on a college loan, are available only to taxpayers who qualify for these deductions based on specific expenditures or income limits, or both.

Other deductions are more widely available. For example, you can take a standard deduction, an amount that's fixed each year. And if your expenses for certain things, such as home mortgage interest, real estate taxes, and state and local income taxes, total more than the standard deduction, it may pay for you to itemize deductions instead.

However, if your adjusted gross income is above the limit Congress sets for the year, you may lose some of or all these deductions.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.


An amount that may be subtracted from income that is otherwise taxable.
Copyright © 2008 H&R Block. All Rights Reserved. Reproduced with permission from H&R Block Glossary
References in periodicals archive ?
When an employee exercises an NQSO, the company compares the allowable tax deduction with the related financial statement compensation expense computed earlier and credits the tax benefit associated with any excess tax deduction to APIC.
Depending on the real estate market this deduction could be valuable.
Simply stated, the amount of the charitable deduction is computed by determining the difference between the fair market value of the property before and after the granting of the conservation easement.
Thus, the U.S.-based charity can be said to distance the contributing corporation from the foreign use of the contribution, thereby attenuating the relationship between the charitable contribution deduction (and any goodwill accruing from it) and the corporation's foreign-source gross income.
Chasing a deduction for something you don't need is just throwing money away."
The bottom line is that the 2018 standard deduction has a greater chance of exceeding your 2018 itemized deductions.
* Claims that remain fully includible in gross income, but where the related legal fees and court costs are not eligible for the above-the-line deduction outlined in section 62(a)(20).
The Treasury is authorized to deny, by regulation, a deduction for any donation of clothing or a household item that has minimal monetary value--such as used socks and used undergarments.
Taxable income for section 199 purposes has the same definition as taxable income under section 63 without regard to the section 199 deduction. (11) This means that taxable income is determined after the application of any net operating loss (NOL) carryover.
Also, in the case of a lighting system of a non-warehouse building that does not reduce lighting power density by at least 40%, only a prorated partial deduction is allowed.
The Section 179 deduction allows a small business to deduct up front the cost of new equipment bought, delivered, and put into service (but not necessarily paid for) before Dec.